Kuzio Corporation produces and sells a single product Data c

Kuzio Corporation produces and sells a single product. Data concerning that product appear below:

The company is currently selling 6,000 units per month. Fixed expenses are $263,000 per month. The marketing manager believes that a $5,000 increase in the monthly advertising budget would result in a 140 unit increase in monthly sales. What should be the overall effect on the company\'s monthly net operating income of this change?

Multiple Choice

decrease of $5,000

increase of $7,280

increase of $2,280

decrease of $2,280

	Per Unit	Percent of Sales
Selling price	$	130			100	%
Variable expenses		78			60	%
Contribution margin	$	52			40	%

Solution

Overall effect on the company\'s monthly net operating income = (140*52)-5000= 2280 Increase of $2,280 is the correct option